The credit supply channel of monetary policy tightening and its distributional impacts

Joshua Bosshardt, Marco Di Maggio, Ali Kakhbod and Amir Kermani

Journal of Financial Economics, 2024, vol. 160, issue C

Abstract: This paper studies how tightening monetary policy transmits to the economy through the mortgage market and sheds new light on the distributional consequences at both individual and regional levels. We specifically examine the sharp increase in mortgage interest rates during 2022 and 2023. We find that almost all of the decline in mortgages compared to prior years was concentrated in loans that would have had a debt-to-income (DTI) ratio above underwriting thresholds. These effects are even more pronounced for minority and middle-income borrowers. Additionally, regions more affected by the thresholds exhibited greater reductions in mortgage originations, house prices, and consumption.

Keywords: Interest rates; Mortgage lending; House prices; Debt-to-income (DTI) (search for similar items in EconPapers)
JEL-codes: E43 G21 G51 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: The Credit Supply Channel of Monetary Policy Tightening and its Distributional Impacts (2023)
Working Paper: The Credit Supply Channel of Monetary Policy Tightening and its Distributional Impacts (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:160:y:2024:i:c:s0304405x24001375

DOI: 10.1016/j.jfineco.2024.103914

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